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Immigrants — economic challenge of Germany

21 Feb 2019 15:41|Marcin Lipka

"Since 2011, over 8 million economic migrants have moved to Germany, mainly from Europe. The majority of them have had a very positive impact on the economy. However, it is more difficult to evaluate the economic impact of the recent wave of refugees from the Middle East and Africa. The gigantic costs of their integration may still outweigh their positive contribution to the labour market for years to come," writes Marcin Lipka, Conotoxia Senior Analyst.

Although reports on migration in Europe have been strongly affected by refugees seeking help and shelter in recent years, between 2011 and 2017 Germany was mainly visited by people interested in work and higher wages than in their home state.

According to data from the German Economic Research Institute (DIW Berlin), more than 8 million out of 10 million people who came to Germany over the seven years surveyed were economic migrants. Most of them came from countries that joined the EU after 2004. On average, almost 600,000 people from the new EU Member States and 150,000 from the 12 countries of the eurozone came to Germany every year. Nowadays, all immigrants, including refugees (about 1.8 million), account for almost 15% of the German population aged 15-74.

Positive impact on competitiveness and GDP

Foreign employees allowed Germany to significantly reduce tensions in the labour market. Despite the high activity of up to 80% (in Poland about 10 percentage points less — according to Eurostat), the German economy was short of workers. This gap is filled by those who come from abroad, not only from the EU but also from other European and Asian countries.

The economic activity rate for the group is as high as that of German citizens, and the unemployment rate of workers coming from the EU is only about 2 percentage points higher than the general level in Germany.

The inflow of employees from other countries also allows German companies to reduce costs, which, despite low unemployment (3.3%), keeps labour costs per unit under control. The international character of German companies and their multicultural employees also contribute to the overall competitiveness of the entire economy.

According to DIW data ("EU immigration has increased Germany's economic growth"), between 2011 and 2016, newly arriving EU workers supported economic growth in Germany by an average of around 0.2 percentage points each year, and in 2015, it was even 0.3% (with a total development of 1.5%). This has been a very significant contribution given the size of the German economy.

A lot of work ahead of Germany

Between 2015 and 2016, more than 1.1 million citizens from 8 countries, mainly Syria, Iraq, Afghanistan, Iran and Eritrea, applied for refugee status. Despite extensive assistance from Germany to people who have escaped the war, effective inclusion of these people, unlike regular immigrants, is very difficult.

The size of the problem is shown by data from the Federal Office for Migration and Refugees (BAMF). According to a comprehensive survey carried out among refugees, only 34% of people are able to read and write using the Latin alphabet. The others either did not know it at the time of the survey (51%) or could not even read in their own language (15%). Up to 1,200 hours of learning are planned to bring their language skills to at least A2 (lower intermediate level).

Although, according to the DIW report ("Language skills and the employment rate of refugees in Germany improving with time") published at the end of January 2019, language skills are improving with time, there is also a large gap between the educational levels of Germans and refugees.

Even though the average length of a refugee’s career since arriving in Germany was about 10 years, only 11% of people have a university education (for Germans aged 30-34 it is 34%). In the case of the German labour market, only 5% of people with secondary education have extensive vocational training. Among Germans, it is 59%.

A tremendous challenge to integrate women

Although only 30% of the refugee population are women, the challenge of their integration may be much more serious than for men. According to a detailed survey from 2017, the employment of women who were forced to leave their countries due to political tensions or war was only 6% in Germany (i.e. 94% were economically inactive or looked for a job) after a period of about 2 years in the country. In the case of men, it was 27 per cent.

Even if the number of refugees was small (between 2004 and 2010 only about 30,000 per year), women's participation in the labour market also differed significantly from that of men. OECD's publication "Triple disadvantage? The integration of refugee women" shows that the employment rate of refugee women in Germany after 6-10 years of arrival was only about 20 per cent. The same applied in Austria. In Denmark, Sweden and Norway, these values range from 30-40 per cent, which is also very low.

The DIW publication also shows that before their arrival women were mostly engaged in jobs requiring medium or high qualifications (to a greater extent than men), but when they are in Germany as many as 61% of them do not require any qualifications or only basic jobs. This is a much greater difference than in the case of men. Difficulties in the proper use of skills and cultural issues can cause problems in integrating women into the German labour market as well as into society.

Enormous costs

Unlike normal economic migration, where the host country bears virtually no costs, refugees represent a major expense and logistical challenge at both the local and federal level.

According to the German Finance Ministry's data, quoted by Reuters in mid-2018, to which Der Spiegel reached, the costs to the German taxpayer associated with refugees are estimated at 70 billion EUR at the federal level and another 8 billion EUR in the case of the federal states.

Up to 31 billion EUR will be used to combat the causes of migration in countries from which citizens flee. 21 billion is to be spent on benefits and 13 billion on language courses and other initiatives to support integration. These are all costs until 2022 only. It is easy to estimate that in total they will exceed 100 billion EUR, taking into account the whole integration process.

In Germany, there are approx. 40 million households, it's easy to calculate that the refugee cost is 2,000 EUR per household. If you look at the issue on the other hand and slightly simplify the problem for each refugee, the expenditure will amount to around 40,000 EUR over 4 years.

Is there a solution?

Currently, Germany has practically only one solution — to try (which is also observed) to integrate refugees into society in the best way possible. Only by building up appropriate professional and linguistic skills is it possible to find a satisfactory job and make a positive contribution to the German economy in the future.

This should be made easier by good cooperation between the education sector, NGOs, businesses, the federal government and the Länder. However, it is difficult and costly to integrate even with the efforts of society as a whole, mainly due to the scale of the inflow of refugees and severe cultural differences.

21 Feb 2019 15:41|Marcin Lipka

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